If it seemed a bit calmer yesterday in global markets than has become typical, it was likely due to the absence of Chinese influence. China’s markets were closed for the country’s annual Dragon Boat festival, a holiday tradition that supposedly dates back 2,000 years. According to state media, it’s not strictly Chinese any longer. The celebrations have apparently spread all [...]
As a starting point, the TIC data is enormously helpful. Not only does it provide some badly needed level of detail, the series’ focus is right in the area where everything matters. Ostensibly about Treasuries being bought and sold in foreign places, quite by accident the Treasury Department has captured an introductory measure of offshore “dollar” money. What’s truly helpful [...]
Back a few months ago when Europe was booming, or at least everyone was sure that this one particular economy was, market futures prices indicated an expectation for the first European rate hike to take place by Q2 2019. That was consistent with the US Federal Reserve’s experience as well as how the mainstream narrative had developed especially over the [...]
The concept of bank reserves grew from the desire to avoid the periodic bank runs that plagued Western financial systems. As noted in detail starting here, the question had always been how much cash in a vault was enough? Governments around the world decided to impose a minimum requirement, both as a matter of sanctioned safety and also to reassure [...]
The Crash of ’87 was a big deal, though not in the way most people remember. It was a stock market event, obviously, and those are the terms under which it has been understood. That’s not really its legacy, however, as the major shifts that began with Black Monday have had little and most often nothing to do with stocks [...]
Back in February, Japan’s Cabinet Office reported that Real GDP in Japan had grown in Q4 2017 for the eighth consecutive quarter. It was the longest streak of non-negative GDP since the 1980’s. Predictably, this was hailed as some significant achievement, a true masterstroke of courage and perseverance. It was taken as a sign that Abenomics and QQE was finally [...]
Early last month, Deutsche Bank replaced one CEO pledged to paring back the bank’s ailing franchise with another committed to doing the same thing only more quickly. As I wrote at the time, “Cryan isn’t being ousted because he was wrong, but because he was right.” In comes Christian Sewing whose plans are starting to come into focus. It’s not [...]
There’s one final step to our examination of QE and bank reserves (you’ll need to read through at least Part 1, though Part 2 is worth the time, too). It’s all well and good to try and map out complex subjects using very simple models. That can help illuminate concepts, but we should always strive for validation. The heart of the [...]
Since we’ve already cracked open the accounting, it makes some sense to take our example into an important corollary examination (if you haven’t yet, you’ll need to read through Part 1). In our prior examples, we’ve assumed that the swap of risk-free assets on Bank A’s asset side is a neutral trade. That is, there aren’t any costs or downside [...]
I completely understand the confusion regarding bank reserves. I really do. It’s easy to believe they are money because that’s what you’ve been taught from Day 1. Not only that, the same message is carelessly reinforced in the media every single time QE or any LSAP is referenced. Bank reserves are the aftermath of money printing, therefore = money. That [...]
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